| 324,287-square-foot institutional-quality office campus Through one of its life company correspondents, Antonio Hachem, vice president, PSRS, provided 100% structured acquisition financing, on a non-recourse five-year term. This $54.5 million loan has three years I/O and 25-year amortization thereafter. This asset provided the life company an opportunity for yield in the Seattle market, where the lender had little to no exposure.
This is a borrowers dream come true, where they gain from a high leverage loan at 100% of purchase price (90% LTC) with Life Company pricing and certainty of execution. What Stands Out:
- Bought at a 9 cap providing tremendous cash flow
- Core plus deal with immediate value add returns
- Cash-on-cash returns average 20% plus
- Rent increases will take the net income over the next four years to an 11 cap, based solely on the existing credit tenants, thus providing a 25% cash-on-cash deal at that point
Upside Strategy:
Sponsor gains additional upside in the excess land. City planners see potential for a 300,000 to 400,000 square-foot mid-rise to be added at the rear of the building.
With limited supply in Renton, especially for big block space, the owner can entitle the excess land and either sell it or enter into a build- to-suit for a large single tenant. Either way, they could add $10 to $15 million in additional value, noted Hachem. Final Word:
All in all, the returns are high and reliable. The tenants are happy with buildings and have expressed long-term plans for this project. Overall, the sponsor and lender believe it's a great hedge even if the market cools down, given the rents are already so low relative to the Seattle market as a whole. |
